This story was updated on Tuesday, March 14 at 4:15 p.m. EST
The CEO of Flair Airlines says two major Canadian airlines are attempting to poach his company’s aircraft after four planes were seized over the weekend.
“We've come in and upset the cozy duopoly, and as a consequence people want us out of business,” said CEO Stephen Jones at a news conference Monday (March 13). “And we do believe that there were negotiations going on behind the scenes between one of the majors and the lessor to hurt Flair by them offering probably above-market rates for the aircraft we've been leasing.”
“While I'm not going to name names or cite evidence, I believe that there is much more to this picture than the surface that you see.”
The Edmonton-based low-cost carrier had four aircraft grounded on Saturday (March 11) due to a “commercial dispute” with a New-York based hedge fund and aircraft lessor Airborne Capital Inc.
Several flights were cancelled as a result – just as the busy March Break travel period was ramping up.
The action impacted service on four of Flair’s Boeing 737s: two at Toronto Pearson, one in Edmonton and one in Waterloo, ON.
Speaking to the Globe and Mail that day, Mr. Jones, said the airline owes about US$1-million in back payments, admitting the carrier fell behind on lease payments after a “tough” winter on some routes.
Yesterday, Jones confirmed Flair owed the company $1 million on the leases, but called the seizure an unusual action.
"A million dollars, while it’s a lot of money, is less than half one-day sales for us, so it's not that we were desperately short. We were in communication with them, I was talking to the head of Airborne on Friday, saying, 'You’ll be paid on Monday,' and then this happened in the middle of the night on Friday night," he told reporters.
The CEO added that it's not unusual for airlines to make payments on leases a few days late, but noted that in his two decades in the business, he's never seen a leasing company seize planes.
"We think that the seizure of these aircrafts was connected to conversations with another airline," Jones said. "As a lessor the last thing you want to do is take back aircrafts unexpectedly and be stuck with them, so it’s pretty clear they had somewhere else to put these aircrafts."
He said Flair is “100 per cent caught up,'' referring to payment on leases across Flair’s 19-plane operating fleet. (That does not include the four seized planes.)
Jones also expressed doubt about retrieving the seized aircraft from Airborne Capital.
The CEO’s comments speak to the heightened competition currently playing out in Canadian aviation these days as new players enter the ring and demand for air travel remains high.
The abrupt seizure of four Flair planes saw the carrier scramble to find other planes over the weekend to help passengers deal with the last-minute cancellations.
The carrier said it deployed a dedicated a team to help passengers rebook their flights with Flair, or another airline, at no additional cost.
The budget carrier also said customers could rebook their own travel and receive a reimbursement from Flair within seven days.
Adjusting the summer schedule
Jones said about 1,900 travellers saw their flights cancelled on Saturday, with some 420 of them rebooked within three days. Others opted for reimbursement.
No flights were cancelled on the following Sunday or Monday as Flair fired up three planes that were being saved for summer, and a fourth that had been freshly leased, he said.
If the four seized airplanes cannot be returned, Flair's summer expansion plans may be scaled down.
“We will need to either get other aircraft in, but this is relatively short notice, or we will need to adjust the schedule, I guess is the harsh reality," Jones said.
Airborne Capital responds
In a statement to PAX on Tuesday afternoon (March 14), Airborne Capital said it "strongly rejects the allegations that have been made by Flair Airlines in recent days in relation to four Airborne-managed aircraft."
"The leasing of the four Airborne-managed aircraft was terminated following a five-month long period, during which Flair was regularly in default of its leases by failing to meet its payments when due, with payment arrears reaching millions of dollars," the company wrote in an emailed statement. "Throughout this period, senior Airborne executives were in direct and regular contact with representatives of Flair, reminding them of their legal obligations. However, missed payments and lease defaults persisted."
Terminating an aircraft lease is always a last resort, and such a decision is never taken lightly. In this case, following numerous notices to Flair, it again failed to make payments when due and Airborne took steps to terminate the leasing of the aircraft."
Airborne noted that it has a legal obligation to "seek to mitigate losses flowing from Flair's default."
"Airborne has taken steps to meet that legal obligation. Despite these efforts, material losses are expected in relation to the repossession and remarketing of the aircraft," the company said, noting that it has no further comment on the matter.